Category Design is What Creates Legendary Companies

Category Design Is What Creates Legendary Companies

You won’t go far playing the 7-minute ab game

The ability to compete in a market category is one skill, but the ability to create the category and design the market is a fundamentally different skill. This is an important distinction.

Exponential success is about creating new things, not fighting over who can sell the most of old things. Successful entrepreneurs create their own game. Their success comes from being radically different—not from fitting in. The companies and people who are the most different are the ones who make a difference. That’s why legendary entrepreneurs, CEOs, leaders, and marketers are category designers. 

For example, no one was shopping for cloud CRM until Marc Benioff taught them to. He’s an intuitive category designer. 

Category designers are the creators and inventors who define (or redefine) the game by establishing and developing entirely new market categories, and executing to position themselves as the leader, to become category queens and kings.

And category dominating companies are valued 5x more than comparable high-growth companies.

One of the reasons I admire the Emergence Team is because they share my belief that the companies and people who make the biggest difference do so by design—they don’t create more of the same. What legendary companies—such as Apple, Salesforce, Tesla—do is design a whole new category and open the world up to a new way of thinking.

Below, I've captured my Top Tenets for Category Design.

1. Be exponentially different, not incrementally better.

Most companies fall into one of two categories: 1) those that bet that things will mostly stay the same, so they focus on making incremental improvements and competition; and 2) those who envision the world being different because they are creating something new.

Most entrepreneurs believe that having the easiest, fastest, cheapest product will win. Now, don’t get me wrong, I believe that having legendary products, services, and technology are critical, but it’s not sufficient.

I always share this funny, but oh-so-true example from the cult favorite There’s Something About Mary. 

You may remember when Ben Stiller’s character picks up a hitchhiker who proceeds to share his secret get-rich-quick plan to create “7 Minute Abs” to beat out “8 Minute Abs.” I’m sure you all remember the look on his face when Ben turns to him and asks what he’s going to do when someone does 6 Minute Abs.

Exactly… 

North of 90% of businesses are playing a “6 Minute Abs game.” They are competing with a better, faster, cheaper, bigger, smaller, etc. strategy. This is a race to the bottom that will ultimately destroy your margins and growth. It’s a fool's errand. A trap.

2. Design your market category, don’t fit into it

Product-market fit is the belief that “if the dogs eat the food” you’ll win. It’s a belief commonly held in Silicon Valley, and companies that achieve product-market fit are thought to have achieved something important. Contrary to many, I have a different take.

I believe that product-market fit is a dangerous idea. This mindset can trap inventors and creators into thinking success is about some product taste test or focus group game. As in:

1. Build product
2. Show product to customers
3. If customers like/use/buy the product, success!

100% wrong.

Legendary products and technologies do not speak for themselves. If you look at some of the people who fundamentally changed the way society moves and works, you’ll find a common mindset. People have attributed Henry Ford, the inventor of the automobile and the father of modern consumer transportation, to have said, “If I had asked people what they wanted, they would have said faster horses.” 

Even if he didn’t say those exact words, it speaks to the fact that people typically can only think within the confines of the status quo. Steve Jobs had the same ideas on product-market fit, saying “customers don’t know what they want until we’ve shown them.”

Legendary entrepreneurs and CEOs teach the world to think differently about a problem and therefore a solution. And when enough people agree with your point of view, a new way of thinking emerges. When this new thinking tips, BAM! a new market category is designed.

The person and company evangelizing the new and different approach becomes the category queen of the space she created. That’s exactly what Sara Blakely did. She did not stop at building a legendary product: Spanx. She also created a whole new category: Shapewear. 

3. Challenge the status quo

Sometimes the answer to another problem is right in front of you, or hidden in plain sight, but we’re so programmed to see things for exactly what they are at face value. True inventors and legendary entrepreneurs look at things differently. 

For example, I’d argue that the wheel is one of the greatest inventions of all time. But it took several millennia after the wheel’s creation for people to start using it for transportation. Nelson Mandela teaches us, “It always seems impossible until it's done.” In order to do this, challenge what is, flip the market upside down, and play around with what is possible.

4. Successful products don’t live in a vacuum

One of the biggest reasons so many startups fail is that entrepreneurs launch with great ideas, but little go-to-market expertise. A lot more than a flashy demo or catchy swag is needed to cut through the crowded market today. 

Through my career as CMO and advisor, I have seen far too often that founders and CEOs think their products will “sell themselves,” but most of the time they won’t. When you are creating a whole new category, you are on a crusade. You need to think bigger than just selling your product, you need to educate about the new market. You need a provocative and engaging point of view.

And the greatest founders are missionary evangelists, who teach the world how to think and act in new and different ways. They don’t market products. They engage people in a mission.

5. Don’t invite comparison

One of the most common marketing (and advertising) mistakes people make in business is to fall into a trap of competition. To most people, there is nothing worse than a brand that only puts out content that is 100% focused on singing their own praises. We’ve all accidentally clicked on a paid promotional article or seen the annoying TV ads for local car dealership commercials shouting from the rooftops that they have the best inventory at rock bottom prices. 

To become different, don’t get caught in comparison wars. It not only turns off customers, but with the few seconds you have to grab your customer’s attention, companies should instead focus on telling them about the whole new category and the opportunity that awaits them. 

6. Tell the world exactly how to think differently

Legends tell the world exactly how to think differently about a new category of product or service. They condition the world to think the way they do.

Steve Jobs was renowned for his ability to create new categories.The iPad is a great example of this. The tablet category was actually launched in 2000 by Microsoft under Bill Gates, but most people don’t remember it that way. 

Instead of defining a new category completely, Gates hung his hat on a product conversation—look at this stylus, look at this feature, look at how cool it is—hence most consumers didn’t understand its use case. 

Roll the clock forward, and Steve Jobs stood up and said that the iPad creates and defines an entirely new category of mobile device. He told the audience to keep buying MacBooks, keep buying iPhones and now there's a new third category that you need to invest in. Jobs actually increased the overall size of the entire device market category and today, if you were to spin the iPad out of Apple today, it would be in the top third of the Fortune 500.

As market data has shown—and as reported in my first book Play Bigger—if done successfully, category designers typically consume the markets they’re in, with a market share of 76%. 

Savvy investors look at three factors that drive market cap or valuation: 

• Perceived size and growth rate of the market category
• The founder’s ability to execute
• Company metrics such as user growth and engagement

Companies that investors believe are designing a new category and have a meaningful competitive advantage in terms of more customers, data, and insight are valued at 5X more than the companies that follow them.

I urge everyone, whether they are a founder or an employee, to take a look at your current strategy and the market for an opportunity to define and lead a new category. 

Remember, legends don’t make the world incrementally better, they make it exponentially different.